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Low-wage countries' competition, reallocation across firms and the quality content of exports

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Author Info

  • Julien Martin

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

  • Isabelle Méjean

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, Ecole Polytechnique - Ecole Polytechnique, CEPR - Center for Economic Policy Research - CEPR)

Abstract

What is the impact of low-wage countries' competition on the quality of high-wage countries' exports? To answer this question, we develop a new method that uses firm-level data to measure quality changes in sectoral exports. Over 1995-2005, we measure a 11% increase in the mean quality of France's aggregate exports, driven by a reallocation of demand in favor of higher quality producers. The phenomenon is significantly more pronounced in markets where the penetration of developing countries has increased while it is negative where firms face increased competitive pressures from high-wage countries. These results are consistent with within-product specialization along the vertical dimension. They suggest that, over the period, France has specialized in the production of higher quality goods. In our data, around one fifth of the measured quality improvement in France's aggregate exports is attributable to low-wage countries' competition. In turn, its increasing specialization in higher quality goods has limited France's market share loss over the period.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00962485.

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Date of creation: Jan 2011
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Handle: RePEc:hal:wpaper:halshs-00962485

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Related research

Keywords: Firm-Level Data ; Quality Heterogeneity ; Low-Wage Countries' Competition ; Within-product specialization;

References

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  1. Pierre Biscourp & Francis Kramarz, 2004. "Employment, Skill Structure and International Trade : Firm-level Evidence for France," Working Papers 2004-28, Centre de Recherche en Economie et Statistique.
  2. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants," Working Paper Series WP03-3, Peterson Institute for International Economics.
  3. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
  4. Bradford J Jensen & Andrew B Bernard, 1994. "Exporters, Skill Upgrading And The Wage Gap," Working Papers 94-13, Center for Economic Studies, U.S. Census Bureau.
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  11. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  12. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1215-1244, November.
  13. Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2007. "Specialisation across Varieties within Products and North-South Competition," Working Papers 2007-06, CEPII research center.
  14. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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  16. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
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Cited by:
  1. Giorgia Giovannetti & Marco Sanfilippo, 2013. "China's Competition and the Export Price Strategies of Developed Countries," Working Papers - Economics wp2013_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.

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